Financial crises can be devastating.
The ripple effects can be deep and long-lasting across society.
And there are stark warning signs that another economic collapse is looming.
The financial crisis of 2007-08 wrecked the U.S. economy and affected markets across the globe.
The main driver of the crash was government intervention.
Politicians incentivized banks to loan to sub-prime mortgage applicants, believing that people wouldn’t default on their mortgage payments.
The government subsidized these loans on this bad assumption and banks rolled these toxic loans into other investments.
Once sub-prime borrowers began defaulting on their mortgages, the entire economy collapsed like a house of cards.
In response to this fiasco, the Fed under Barack Obama set interest rates at virtually zero.
This put a band-aid on the economy by incentivizing consumption and investment in the stock market.
Low-interest rates make it easier for people to get loans for business, homes, and cars.
And investors have to pump money into the market in order to get yields that beat the rate of inflation.
However, this is only a short-term “fix.”
In order for the economy to heal, the government needs to loosen the reins.
Obama did the exact opposite.
His meddling led to the slowest economic recovery in U.S. history.
Interest rates have slowly risen but still remain artificially low.
The market is due for a crash or correction, but Donald Trump’s tax cuts and deregulations have pumped life into the economy.
But the sickness from the 2008 crash hasn’t been eradicated.
One of the major indicators of an impending recession is the inversion of the yield curve.
This means short-term investments in T-bills and such are yielding higher rates of return than long-term investments, which is an inversion of how the typical yield curve should trend.
Usually higher rates of return mean less liquidity, but investors are feeling a recession coming, so many are opting for short-term investments.
Another looming problem is government spending.
Since the U.S. government moved away from the gold standard in 1971, it has dramatically inflated its currency and weakened the buying power of the dollar.
Spending has now spiraled completely out of control.
Deficit hawks have been reduced to a whisper in the wind.
With the government over $20 trillion in debt, interest payments on the debt account for a huge chunk of mandatory expenditures, and that’s on top of bloated entitlement programs that are insolvent.
Social security tax has multiplied by six-fold since Franklin D. Roosevelt first implemented it and the number of workers per social security recipient has been cut from roughly 41 down to below three.
This is entirely unsustainable, and the Democrats are pushing for even more spending.
They all embrace Medicare for everyone, including illegible aliens, even though Medicare is already near bankruptcy.
Their solution is of course, higher taxes and wealth taxes, but that won’t even scratch the surface for their wish list.
The Democrat Party is lining up behind far-leftists who are following the playbook of all the other socialist countries that tried to spend their way to prosperity and ended up plunging their citizens into deeper squalor.
America is in for a world of hurt if government spending and interventions aren’t curtailed.
Now might be a good time to put some of your portfolio in precious metals to hedge against inflation and an inevitable downturn.